MARKET WATCH: WTI rebounds; Brent regresses; gas increases slightly

Front-month crude prices rebound 1.4% Feb. 11 on the New York futures market while in London North Sea Brent hit an intraday low of $117.60/bbl before struggling back to just a 0.6% loss, narrowing the price spread with West Texas Intermediate.

The WTI price was supported by the “‘horse-designed-by-committee’ situation in Europe” with the French premier's call for reduction of the euro ignored by the European Central Bank, which warned against devaluing that currency, said analysts in the Houston office of Raymond James & Associates Inc.

“Concerns about job creation and the economy weighed on markets in the US, likely to the chagrin of President Barack Obama, who we suspect would rather focus tonight's State of the Union address on broader issues such as immigration, gun control, and the stagnating peace process in the Middle East,” Raymond James analysts reported.

OPEC reports

In its monthly report issued Feb. 12, the Organization of Petroleum Exporting Countries estimated it will have to produce 29.8 million b/d to meet world demand in 2013, up 100,000 b/d from its previous estimate but 300,000 b/d below 2012 average production. OPEC reported producing 30.3 million b/d in January.

The price of OPEC’s basket of 12 benchmark crudes rose 2.5% in January to an average $109.28/bbl. For the year so far, OPEC’s basket price has averaged $110.13/bbl (OGJ Online, Feb. 11, 2013). The front-month US futures contract in the New York market was up 7.5% to an average $94.83/bbl in January while ICE Brent ended the month at $112.32/bbl.

“The agreement in the US averting the fiscal cliff triggered a rally in crude prices, along with improving confidence in the global economy,” OPEC reported. “The

increasing optimism about the economic outlook has also stimulated a large wave of speculative buying in the oil futures market.” Increased capacity for the Seaway Pipeline from Cushing, Okla., to the Gulf Coast, open arbitrage to Asia, and production glitches in the North Sea market also influenced WTI and Brent prices.

OPEC’s estimate of world economic growth remained unchanged at 3% for 2012 and 3.2% for 2013, but a weak fourth quarter reduced its estimates of US growth to 2.2% in 2012 and 1.8% in 2013. Japan’s estimated growth was unchanged at 0.7% this year, after an estimated expansion of 2% in 2012. The Euro-zone is still forecast to recover to 0.1% growth from a decline of 0.4% in 2012. China continues to benefit from increased global trade and is forecast to expand 8.1% in 2013 and 7.8% in 2012, up 0.1% and 0.2%, respectively. India’s growth in 2013 has been revised to 6.1% from 6.4%, following growth of 5.5% in 2012.

“While a tentative recovery in the global economy is visible, a number of fiscal-related issues in the developed countries remain and are likely to impact growth in the coming months,” said OPEC officials.

Energy prices

The March and April contracts for benchmark US sweet, light crudes jumped by $1.31/bbl each to $97.03/bbl and $97.58/bbl, respectively, Feb. 11 on the New York Mercantile Exchange. On the US spot market, WTI at Cushing was up that same amount to match the March closing price.

However, heating oil for March delivery slipped 0.69¢ to $3.23/gal on NYMEX. Reformulated stock for oxygenate blending for the same month dropped 3.76¢ to $3.02/gal.

Even as workers in the Northeast were digging out from 3 ft of snow dumped by a weekend blizzard, the March natural gas contract recovered 0.7¢ to $3.28/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., fell 5.6¢ to $3.22/MMbtu.

In London, the March Brent contract lost 77¢ to $118.13/bbl. Gas oil for February was down $4.50 to $1,026.25/tonne.

The average price for OPEC’s basket of 12 benchmark crudes was down 8¢ to $114.36 for the day.